CHEROKEE-ETOWAH-DEKALB FELLOWSHIP HOUSE, INC.Non-Profit

Segregation of Duties Criteria: A basic internal control over financial reporting is the segregation of duties of transaction processing, record keeping, reconciliation, and custody of assets. Condition: This is an inherent limitation for entities that are small in size and thus, have limited staff to perform designated functions. Context/Cause: During our audit, we noted that duties were not segregated in a number of areas where small adjustments to the policies of the Organization could help to further facilitate this important control. These areas include cash disbursements, bank reconciliation, customer billing, cash receipts and collections, and approval of journal entries. Effects: Lack of segregation of duties and a corresponding lack of monitoring and oversight increases exposure to misappropriation of assets and errors in financial reporting. Recommendation; We recommend that management continue to evaluate the procedures and policies used in the accounting area and continue to segregate duties where possible. Additional oversight, monitoring, and approval will be necessary in areas where duties cannot be segregated at an optimal level due to limitations in staff size. Auditee’s Response; Management has issued written policies and required training of all employees that handle financial transactions and has continually evaluated processes to find ways to segregate duties where possible. Management and the board of directors continue to oversee operations closely requiring approvals for all transactions.

Material Adjustments Criteria: Management is responsible for reconciling the accounts during the year and at year end in order to generate financial statements that are in accordance with Generally Accepted Accounting Principles. Condition: Insufficient controls over financial reporting resulted in material adjustments being required to prevent the Organizations financial statements from being materially misstated. Context/Cause: The Organization relied on auditors to propose entries after audit procedures and had not recorded entries needed at the time of the audit. Effects: Lack of internal controls over balance sheet account reconciliations and adjustments could result in undetected errors and irregularities and misstated interim financial reports. Recommendation: We recommend that management maintain reconciliations on a monthly basis to keep balance sheet accounts reconciled and correct and to document which accounting procedures are needed and when they should be performed on a recurring basis to detect material adjustments that are required. Auditee’s Response: The Organization will incorporate financial reporting internal controls to detect material adjustments, prevent materially misstated financial statements,and increase the accuracy of interim financial reports used by management.